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One-Third of Americans Who Sold Their Home in the Past Year Lost Money; Trend Expected to Continue As Home Values Decline for Seventh Straight Quarter

Depreciation Becomes Long-Term:

One in Four Markets Covered Have Negative or Flat Annualized Change Over Five Years, According to Q3 2008 Zillow(R) Real Estate Market Reports

Nov 12, 2008

SEATTLE, Nov. 12 /PRNewswire/ -- Home values in the United States posted their seventh consecutive quarterly decline, falling 9.7 percent year-over-year to a Zillow Home Value Index(1) of $202,966, according to the third quarter Zillow Real Estate Market Reports(2), which encompass 163 metropolitan areas.

The continued declines in value are causing more homeowners to sell their homes for less than the home's original purchase price. Over the past 12 months, 30.2 percent of homes sold were sold for a loss, up from 23.7 percent at the end of the second quarter. In 17 markets - 14 of which are in California - more than half of homes sold in the past year were sold for a loss(3).

The percentage of homeowners with negative equity remained fairly steady from the second to the third quarter as more foreclosures were completed and as median down payments rose in 61 markets. One in seven (14.3 percent) of all homeowners across the country has negative equity, and of homeowners who bought in the last five years, almost one-third (29.5 percent) are underwater(3).

Meanwhile 27 of the 163 metropolitan statistical areas (MSAs) covered by Zillow's reports are experiencing longer-term impact, showing negative annualized value changes over the past five years, and 12 of the markets show flat five-year annualized returns. Most affected by long-term depreciation were hard-hit areas in California's Central Valley, like Stockton, where the five-year annualized change is -3.8 percent. Also affected are areas like Greater Boston, where the five-year annualized change is -1 percent, and the Cleveland area, where the change is -0.8 percent.

Nationally, five-year annualized change for the third quarter is 3.4 percent and 10-year annualized change is 6.1 percent.

"The fact that one-quarter of markets in Zillow's third quarter reports show negative or relatively flat annualized change over five years is an indication of the enormous amount of value that has been taken out of the real estate market through home value depreciation in the past few years," said Dr. Stan Humphries, Zillow vice president of data and analytics. "It's clear we are at a unique point in history; we've had seven consecutive quarters of decline, and we expect that to continue until at least the middle of next year. Most markets are still seeing five-year annualized returns, but we will see more markets slip into flat or negative long-term change as the economy continues to suffer, factors like job losses begin to further affect foreclosure rates and home values continue to decline."

Foreclosures made up almost one in five (18.6 percent) of all transactions in the past 12 months. Not surprisingly, areas with the highest foreclosure rates are the markets with some of the greatest home value declines. In California's Central Valley, 57.6 percent of transactions in Merced were foreclosures, and in Stockton, foreclosures made up 56.4 percent of transactions. The New York metro area continued to have the lowest rate of foreclosures, with only 3.5 percent of all transactions being foreclosures(4).

It's not all bad news, however: 12 of the 163 markets in the report experienced year-over-year change in value of more than 1 percent. Most of the bright spots were in the Carolinas and upstate New York, with the Ithaca, N.Y. area experiencing a year-over-year change of 5.6 percent and the Rochester, N.Y. area seeing a 3.1 percent increase. Home values in the Jacksonville, N.C. area increased 3.9 percent and were up 3.4 percent in Winston-Salem, N.C. None of those markets experienced bubbles, but instead have seen steady year-over-year growth for the past eight years.

Some homeowners continue to be largely oblivious to the reality of the housing market, however. According to the third quarter Zillow Homeowner Confidence Survey(5), nearly half of homeowners (49 percent) believe their own home's value either increased or stayed the same over the past year. But based on the third quarter Real Estate Market Reports, almost three-quarters (74 percent) of all homes lost value in the past year.

Zillow.com is an online real estate community where homeowners, buyers, sellers, real estate agents and mortgage professionals find and share vital information about homes, for free. Launched in early 2006 with Zestimate® values and data on millions of U.S. homes, Zillow has since opened the site to community input, data and dialogue. One of the most-visited U.S. real estate Web sites, Zillow's goal is to help people become smarter about real estate in every stage of the home ownership process-- buying, selling, remodeling and financing. The company is headquartered in Seattle and has raised $87 million in funding.

Zillow.com, Zillow, and Zestimate are registered trademarks of Zillow, Inc.

(1) The Zillow Home Value Index is the median Zestimate valuation for a
given geographic area on a given day and includes the value of all
single-family residences, condominiums and cooperatives, regardless of
whether they sold within a given period. The Home Value Index at the
national and MSA levels is calculated using the median home value for
each county. It is expressed in dollars and is for a particular
geographic region.
(2) The data in Zillow's Real Estate Market Reports is aggregated from
public sources by a number of data providers for 163 Metropolitan
Statistical Areas dating back to 1996. Mortgage and home loan data is
typically recorded in each county and publicly available through a
county recorder's office.
(3) "Homes sold for a loss" is calculated by comparing public transaction
prices in Q3 to the last recorded sale of a home. This does not
include closing costs or service-related fees like inspections or
commissions.
(4) Negative equity indicates that the current home value as of Sept. 30,
2008 is less than the original mortgage. To be conservative,
principal payments and equity withdrawals since initial loan
origination have been excluded from the analysis, which is consistent
with standard reporting practices.
(5) The survey was conducted online by Harris Interactive within the
United States on behalf of Zillow.com between Oct. 7, 2008 and Oct. 9,
2008 among 2,021 adults ages 18+, of whom, 1,388 are homeowners.
Unless otherwise indicated, all survey percentages have been
calculated to exclude "not sure" or "don't know" responses. This
online survey is not based on a probability sample and therefore no
estimates of theoretical sampling error can be calculated. A full
methodology, including weighting variables, is available.
(6) While many foreclosure transactions are included in the number of
homes sold for loss not all are included, as there are foreclosed
homes that sell for more than the foreclosed owner originally paid. A
foreclosure transaction is recorded after a homeowner is forced to
surrender their deed to either the bank or a third party who buys the
home at an auction.